Money123: A short circuit in the electric vehicle market?

Would tariffs jumpstart EV prices?

Over the month of July, the Canadian government will consult with stakeholders about plans to tackle what it calls the “oversupply” of Chinese-made electric vehicles in the global market.

Many experts agree this could mean more tariffs on cheap, Chinese-made EVs to keep policies in line with economic partners like the United States and European Union.

Greig Mordue, an associate professor at McMaster University’s Booth School of Engineering Practice and Technology, said Canada is likely to lean towards tariffs at the end of the consultation process.

“I think you can be pretty confident that we’re going to come out of this with pretty substantive tariffs or protectionist measures at the conclusion of this study,” he told Global News this week.

But will it impact consumers? And when is a good time for a prospective EV buyer in the current market?

Here’s what consumers should know before buying their own electric vehicle.

Inflation reacceleration

For market watchers looking for signs the Bank of Canada will deliver another interest rate cut in July, this past week’s inflation report probably wasn’t the news they were hoping to see.

Inflation reaccelerated somewhat in May, ticking up to 2.9 per cent last month from 2.7 per cent in April. Rising rents helped push up the overall cost of living, as did services inflation elsewhere in the economy.

The annual inflation figures have remained below three per cent every month so far in 2024, but the Bank of Canada’s preferred metrics of core inflation also picked up some pace in May.

Oddsmakers slashed bets for a July rate cut in response to the report on Tuesday.

But economists weighing in this week noted that the Bank of Canada will have another inflation report for June to consider before its next decision on July 24.

Read more on what experts are saying about the pace of interest rate cuts consumers should expect.

Six-figure gifts for homes

Buying a home with the support of a parent or other family member is “becoming the norm,” a new report from CIBC showed this week.

And those gifts are getting larger, data shows.

The average amount first-time homebuyers are getting in financial gifts from family has hit $115,000 so far in 2024, the CIBC report shows. That’s up 73 per cent from 2019 levels.

The data shows 31 per cent of first-time homebuyers have received financial help from family members so far in 2024, compared with 20 per cent in all of 2015.

________________________

– THE QUESTION –

“My wife and I recently got married and are sorting out how to combine our finances. We both came into the relationship with significant debt ($15K for me across student loans and a car purchase) and her mortgage (19 years, $325K or so remaining) and a bit of credit card debt. Is there a way to combine all or most of this into one more manageable monthly payment? Is that recommended or will we end up paying a higher rate on the whole amount? Just trying to get a better handle on how to tackle this.”

— A Money123 reader 

“You should check the interest rates on your current debts before trying to refinance them. They might be at lower interest rates. Your student loan might be at a good interest rate and might give you a tax credit, depending on the type of student loan. Car loans are often at a lower interest rate if the company increased the car price to give you a lower interest rate.

The lowest interest rate financing you can generally get is a mortgage or secured credit line on your home. Your best choice is likely to combine all your debt into your mortgage. You may have to wait until it is due and you may need to ask to have your home reappraised to be able to increase your mortgage.

If your mortgage is not due for a long time, you could apply for a secured credit line on your home. It is also possible to get a ‘readvanceable mortgage,’ which is a secured credit line with a mortgage inside, and transfer your mortgage into it. A readvanceable mortgage has one combined limit for your mortgage and credit line, so that as your mortgage is paid down, you automatically gain credit in your credit line.

The next best is usually either an unsecured credit line. The interest rate should be about prime plus three per cent or four per cent, if your credit rating is decent. It is good to have one longer term to use in case of emergencies, as long as you have the discipline to not spend (it).

You could also apply for an ‘instalment loan,’ which should be a similar rate to an unsecured credit line. It normally has a five-year amortization, so the payment would be quite a bit higher. Ask for an ‘instalment loan,’ not a ‘consolidation loan.’ A consolidation loan on your record looks like you were unable to make your payments and can affect future borrowing ability.

A great wealth-building option can be to apply for a large RRSP loan and use the tax refund to pay off your other debts. This can be brilliant, if you have enough RRSP room and are in a high enough tax bracket.

Getting the lowest interest rate is generally the most important. You can try to keep your payment reasonable either by having longer amortizations for loans or your mortgage, or by having a credit line that is an interest-only payment.”

– Ed Rempel, fee-for-service financial planner and tax accountant, Unconventional Wisdom

__________________